Hungarian Forint Nears 3-Year High

Raise your hand if you've ever heard of the Hungarian Forint. I didn't think so.

The Forint is Hungary's currency, and it is performing quite well, having surged 2.5% against the Euro this month alone en route to a three-year high. The currency's rise can be ascribed to a combination of technical and fundamental factors. On the technical side, the Forint is nearing 240 per Euro which represents the top end of the band within which it was previously permitted to fluctuate. [This band was dissolved by the currency board in February]. According to analysts, a large quantity of options contracts were fitted with a strike price of 240, which is causing the Forint to accelerate as it nears this important barrier. On the fundamental side, Hungary has burnishing its inflation fighting credentials by raising its benchmark interest rate to 8.25%, convincing investors that it is serious in its efforts to maintain price stability. Political uncertainty and a minority government are working against the Forint, but these factors pale in comparison to inflation. The Guardian reports:

Gyula Pleschinger, currency strategist at Morgan Stanley believes the currency will firm further as it was significantly undervalued relative to regional peers.